by Junwei Yang
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Suggested foundations for financial time series and stochastic processes and pricing. Specialist prerequisites vary by paper.
Check whether a relationship can be estimated consistently over time.
Read the fitted relationship and its residuals.
Understand what it means to condition on current information.
Follow Brownian dynamics and the second-order term in Itô calculus.
Study long-run relationships without confusing them with correlation.
Check the assumptions behind reported estimates.
Connect stochastic dynamics to no-arbitrage prices.
Choose a reproducible strategy, specify the trading rule, and test what remains after costs and estimation uncertainty.
Start in discrete time, move to Brownian motion, then read the original pricing argument and simulate it.